#TaxToGo: CCCTB becomes CACTB & blacklists turn grey

Tax To Go gives a snapshot of the latest political and legislative developments on taxation policy at the EU level. In this week’s issue we feature (1) CCTB – many stumbling blocks for little solutions (2) European Parliament – taxes, taxes everywhere (3) Interview with Elodie Lamer – EU tax reporter

François Barry

Consultant

CCTB – many stumbling blocks for little solutions

It’s not easy being a tax proposal when you don’t have the OECD quality stamp. On 23 May, Finance Ministers reachedan agreement on the Commission’s initiative to reflect the goals of the OECD’s BEPS Action 14 on dispute-resolution. ECOFIN is a keen negotiator for legislation aimed at translating the OECD’s actions into EU law (e.g. Anti-Tax Avoidance Directives and revisions of the Directive on administrative cooperation). The same cannot be said for proposals with no apparent link to the OECD’s work, like the Common Consolidated Corporate Tax Base (CCCTB).

Talks on the novel aspects of the Common Corporate Tax Base (CCTB) (i.e. super-deduction for R&D costs, allowance for growth and investment, and loss relief with recapture) are moving so slowly in the Council that the Maltese Presidency called for a policy debate on the matter. During the discussion on 23 May, France, Spain, Italy and Germany expressed their support to C(C)CTB, as did to a lesser extent the Czech Republic, Slovenia and Bulgaria. Typically most of the other countries have either some concerns or strong reservations.

More than 10 Ministers raised fears that C(C)CTB would not leave enough flexibility for member states to adapt their tax policy to their respective economic situations (in particular as regards support to R&D). Tax Commissioner Pierre Moscovici encouraged Ministers to continue technical discussions in order to strike the right balance between harmonisation and flexibility, reminding them however that too much flexibility for member states would jeopardise the purpose of C(C)CTB – a concern shared by Bulgaria and Slovenia.

Moscovici was however more critical of the reproach, made by many Ministers, that C(C)CTB runs the risk of seriously cutting down national tax revenues and that the Commission’s impact assessment was flawed. The Commission’s methodology is transparent, Moscovici insisted, urging the member states currently carrying out their own impact assessments (like Ireland and Belgium) to be as transparent as the Commission is.

In parallel, Belgium warned that C(C)CTB should not affect the right of member states to set their own tax rates; Sweden expressed clear doubts that the expected benefits from C(C)CTB would outweigh its costs; Poland was concerned that consolidation may weaken the linkages between taxpayers (i.e. companies) and the local societies where profits are generated (curiously enough, since the main objective of CCCTB is actually the exact opposite); Cyprus and Luxembourg – most critical member states on 23 May – put into question the proposal’s proportionality and compatibility with the subsidiarity principle.

Luxembourg’s Pierre Gramegna felt it was necessary to remind his fellow Ministers, especially “those who are new around the table” (i.e. France’s Bruno Lemaire), that a lot has been adopted over the past two years to fight tax evasion, sometimes going “far, far beyond OECD BEPS” (just saying “beyond” would have been enough). His underlying message: let’s wait for the Anti-Tax Avoidance Directives to be implemented and for their effectiveness to be assessed before moving forward with C(C)CTB; that is, ‘see you in ten years.’

“The BEPS project took place at OECD level to make sure that we have a level playing field not only inside the EU but precisely with all major regions around the world. If we continue to rush alone we will be isolated out there and this won’t be good for Europe,” Gramegna concluded, translating the fundamental – yet debatable – reason why EU-originated tax proposals (i.e. non-OECD) have trouble finding favour with member states. This is true for C(C)CTB but also for public country-by-country reporting.

Negotiations at technical level will continue. Not much should be expected under the Maltese Presidency anymore, whose credibility was further shaken following the so-called Malta Files. In light of the “very diffuse” issues at stake, talks will remain complicated, fears German Minister Wolfgang Schäuble. Meanwhile, France and Germany announced their intention to draft a joint roadmap by July 2017 for further eurozone integration, in particular through corporate tax harmonisation.